Get your team on board for a responsive pricing strategy by addressing concerns and helping to understand the advantages of dynamic pricing.
Dynamic pricing can be a controversial topic. Even if you’re already using this pricing strategy, there might still be team members that have reservations after a sour experience with dynamic pricing - we’ve all suffered from airlines tripling ticket prices from one day to the next. Ultimately, pricing is personal and your teams might be nervous about how your audience will react to dynamic pricing. However, utilising dynamic pricing can actually help your team do more with your data and learn more from your audiences, taking a holistic view of price sensitivity and booking behavior to more effectively price your events.
In this blog we’ll explore the reservations your team might have around dynamic pricing and the key messages to align them on the value dynamic pricing generates by better understanding your audiences and helping to achieve your organizational goals.
Key messages for arts leaders
Pricing has always been notoriously difficult. As diligent as marketing teams, box office staff, and producers are, you’re still relying on someone’s "best judgement" of what feels like the right price. And feeling is a great place to start! As Vice Chairman of Ogilvy UK Rory Sutherland says, “To an economist, price is a number. To a customer, price is a feeling.” (Rory Sutherland,‘Experience is everything - from the NHS to Disney to Netflix’, Dotdigital Summit, 2023)
However, you might have tracked historical sales data and could still be missing out on maximizing your revenue potential. You could have conducted market research into the title and still misinterpreted its value within your community. You could be applying the same seating/pricing structures you’ve always used and still not fill the house.
Dynamic pricing can help challenge your existing assumptions of your audiences and which price feels right, bringing efficiency and accuracy to your pricing strategy and enabling you to meet your audiences where they are now and be responsive to your audiences of the future.
Here are the key points to discuss with your leadership team if you’re considering dynamic pricing as an opportunity for your venue.
Dynamic pricing has a bad reputation
For the naysayers in your organization who’ve suffered at the hands of volatile dynamic pricing practices; whether they’re a frustrated traveler or a scorned Swiftie, it’s pivotal to understand that most of the time it’s the venue and promoter who are in control of their own pricing.
Absolutely, when we see dramatic price increases in response to demand we should question the strategy’s efficacy but more importantly, we should query the intentions and motivations of organizations applying those pricings, whether dynamic or not.
Take the travel sector. With extreme levels of demand, they have far greater leverage to increase their prices and still achieve their organizational goal - maximum sales at the highest price point. These organizations are not anywhere near as invested in bringing in new customers (audiences), grounding themselves in their communities, or developing a range of opportunities or tailored experiences at all levels of engagement - those pursuits sit at the heart of arts and cultural institutions.
Similarly, large concert venues rely on headline artists they contract in to bring huge loyal audiences with them. Loyalty to the artist is key for these large venues to maximize their sales, allowing them to sell premium "once in a lifetime" packages without much regard for a returning or diverse audience. Those organizations might be using dynamic pricing but their motivations are far from what the average arts and cultural venue is working towards - managing profit margins whilst instilling trust, generating loyalty, and increasing engagement within its community.
Dynamic pricing, when used with consideration, ethically, and in line with broader organizational goals, can achieve far more than just maximizing income.
Once your team starts to compare your values to those of organizations that use dynamic pricing exclusively for revenue maximization, they’ll understand that it’s not the tool that ostracises their customers but the organizations themselves. Dynamic pricing, when used with consideration, ethically, and in line with broader organizational goals, can achieve far more than just maximizing income. Consider it a revenue optimization tool, a pricing strategy that makes the experience seeker feel like they’re booking a luxurious treat while subsidizing other opportunities for your community to engage with you, maintaining or even improving accessibility.
In the rare circumstance you do receive some backlash, have confidence in your approach. Ground your team in the organization’s values and wider goals and empower them to confidently communicate how dynamic pricing allows that activity to run more effectively.
Need some inspiration? Take a look at Edinburgh International Festival’s press statement in response to their adoption of automated dynamic pricing:
"Flexible pricing simply streamlines that price adjustment process, within guidelines that we set, based on demand. We join dozens of arts organisations, classical music venues, as well as contemporary music and events organisers in using this technology. We carefully monitor the pricing and none of the prices this year will exceed our top prices from 2022.”
- Edinburgh International Festival Spokesperson, ArtsProfessional (paid content)
You’re in control
Behind every price is a person. Automated dynamic pricing tools make it easy to pass the blame onto a third party when prices increase dramatically. However, this argument lacks accountability and understanding of how these automated products work. Even with an automated dynamic pricing solution, you can set parameters such as upper and lower price limits, or the ability to exclude certain price zones, that the program can’t waive. An automated dynamic pricing program with rigid rules allows you and your team to explore your audience’s price sensitivity in a controlled environment that you’re comfortable with.
Of course, automated dynamic pricing is most effective when you avoid setting parameters and allow the algorithms to learn from your audiences (both historical and active behavior) to make optimal pricing decisions. An automated dynamic pricing solution can also help initiate small scale experiments to test the market reaction and learn more from your audiences and respond to their behaviour. However, if you did see pricing recommendations beyond your comfort zone, you can intervene at any moment and bring those prices more in line with where you’d expect them to be. This flexibility allows you to experiment with an automated dynamic pricing product with little risk to your audiences and reputation.
Remind team members that dynamic pricing solutions aren’t relying on feelings or assumptions. These products use your data to inform its recommendations (whether increases or decreases) but they’re just that - recommendations. Encourage your team to trust in the tools they’re using and have confidence that they remain in control of their pricing.
Learning more from your audience
If we’ve learned anything from recent years of lockdowns, record levels of inflation, persistent strikes, and the cost of living crisis it’s that we need to be agile in response to audiences’ changing needs. Predictability has waned and yesterday’s data can’t be relied on exclusively to predict tomorrow’s world. Your audience isn’t static, it’s dynamic, and responsive pricing offers greater opportunity to accurately price for where your audience is now and tomorrow.
Your audience isn’t static, it’s dynamic.
Instead of fixating on historic pricing structures, encourage your team to use data to make more informed decisions and learn more about your audience. Ask them about their assumptions of your audience and share some provocations that dynamic pricing data can unlock. Some common considerations that come from dynamic pricing strategies are:
Track how your audience booking behavior is changing over time
When are they booking in the sales cycle? Can we encourage them to book earlier?
Which seats are most / least popular? Why? Can we fill the house more strategically?
What value is being perceived at each price point? How can we enhance that experience or do we change the price point?
Consider how pricing works alongside all other aspects of your business, particularly in regards to loyalty
Think about how your audience perceives value for the cost of their ticket. Value goes beyond the event so think about how you can extend value through the booking journey or through other live experience markers.
Think about how the value perception might change depending on a customer's engagement with you. For example, are they a member or subscriber? What factors will enhance their experience and keep them invested in your venue?
Over time these data points will allow your team to be far more responsive to changing sales cycles, spot variations early, and get you closer to the optimal price every time.
Don’t know where to start?
Show your team the data at their fingertips. Take a look at our blog on reporting metrics in Spektrix to start investigating your audience's booking behavior.
If in doubt, start small
Finally, if your team still isn't bought into the advantages of dynamic pricing, remind them that they can start small. Dynamic pricing doesn’t have to be applied to your entire program from day one. You can phase in the strategy and test its results.
You can start today - Explore the data available in your ticketing system with your teams to make informed decisions and shape experiments with your audiences. Start with a single event and build from there.
You can start tomorrow - Bring team members and partners together to talk about a phased approach to dynamic pricing. Consider a genre, season, or event to trial a dynamic pricing partner product and automate the process for your team as much as possible.
Even working on a microscale, your team should quickly spot the learnings and opportunities that make a huge difference to the understanding of your audiences and effectiveness of your pricing. Slight adaptations in your pricing can generate more revenue for you and also create greater opportunities for your audiences. With some encouragement, your team will be on board and confident to apply dynamic pricing in no time.
In order to give you a full understanding of dynamic pricing, we're bringing together a chorus of voices from Spektrix and our partners, each with their own unique take.
Explore more perspectives:
- Set Ticket Prices with Confidence: The Benefits of Dynamic Pricing
- Championing Dynamic Pricing to Your Audience
- Dynamic Pricing: Double the Income or a Double-Edged Sword?
Billy Fluck (he/him) is a Program Manager at Spektrix.